In a move that should have sent tremors throughout the accounting world, the European Commission (executive branch of the European Union) on Monday, January 26, proposed funding the operations of the IASB (International Accounting Standards Board) and its parent organization IASCF (International Accounting Standards Committee Foundation). The proposed level of funding is €15 million Euros ($19.7 million USD) annually for a three year period.
The $19.7 million USD is nearly as much as the SEC $23.7 million USD annual contribution to the Financial Accounting Foundation, parent to both the FASB and the GASB. The FASB consumes $31 million USD of the FAF’s $41 million USD budget. If the IASB accepts the funding, it could greatly expand its operations.
This is a clear attempt by the EU to buy the IASB. “Will you be my b*tch?”
According to Kate Burgess (Accountancy Age), the IASB then could be held more accountable by the EU. According to Hew Jones (Guardian), “The EU has long sought to increase its influence over the accounting standards bodies, which [currently] receive no direct EU funding. “ Kevin Reed (Accountancy Age) reports of UK ASB’s Ian Mackintosh:
The IASB must resist extreme pressure against a European carve-out from its standards around fair value
accounting, and push towards convergence with the US or face going out of existence, warned Accounting Standards Board chairman Ian Mackintosh. ‘These pressures bring about threat or opportunity. It’s death or glory.’
No country (or politically united group of countries) has as much at stake in its IFRS relations as the EU. Backtracking to 2005, the EU was shopping for a set of accounting standards as it sought an EU-level regulation of the financial markets within its borders. It had three options to choose from: (1) adopt the accounting standards of one of its member countries (for example, the U.K.’s standards, (2) adopt the accounting standards of the U.S., (3) adopt IFRS (unused by any country at that time. Options 1 and 2 were credible accounting alternatives, but not politically. Option 3 first and foremost was a credible political alternative. Politics ruled, and the IASB became the EU’s darling bride. It is in the EU’s national self-interest that IFRS promotes policies and goals that the EU Finance Commissioner needs to regulate Europe’s financial markets.
This was clearly shown less than three months ago when EU Finance Commissioner Charlie McCreevy warned that if the IASB did not change its accounting standard with respect to fair value reporting, the EU would initiate a carve-out. The IASB caved, as well it should (Accounting Standards Wilt Under Pressure). Until the EU came along, IFRS was a ghost and not adopted by anyone. From the EU’s perspective, the IASB must never commit adultery by prioritizing another’s economic interests over those of the EU. Money will keep it in line.
IFRS is not an international accounting language. It is Europe’s accounting language. It always has been, it always will be. Other countries adopt at their own risk. No country should adopt or retain IFRS, as the IASB will prioritize Europe’s interest over those of “the best accounting interests” or over the interests of any other country.
If the U.S. joins with IFRS, it is joining a love triangle. It will never realize requitted love. The IASB under David Tweedie has flirtatious eyes, but Europe’s Charlie McGreevy will always keep it in line. At the end of every day, IASB will sleep in Europe’s bed, not America’s.
Debit and credit – - David Albrecht